In Early 2016, Wanda Paid $33,000 for an Option on a Parcel

question 33

Essay

In early 2016, Wanda paid $33,000 for an option on a parcel of land she intended to hold as an investment. After a survey of the land (paid for by the grantor) determined that the parcel was much smaller than the grantor said it was, she let the option lapse when it expired in 2017 after 14 months. How should Wanda treat these events in 2016? 2017?

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Definitions:

Price Reduction

A decrease in the selling price of goods or services, often used as a strategy to increase demand or sales volume.

Sales Forecast

An estimate of the amount of goods or services a company expects to sell in a future period.

Traceable Fixed Expense

A fixed cost that can be directly linked to a specific business segment or department.

Net Operating Income

The total profit of a company after all operating expenses, excluding interest and taxes, have been deducted from revenues.